© 2005 epocrates, inc. all rights reserved. slide | 1 ® ® future trends affecting the pharma,...

© 2005 Epocrates, Inc. All rights reserved. Slide | 1

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Future Trends Affecting the Pharma, Biotech and Device Industries

Paul BantaVice President, Law and Policy

Epocrates, Inc.

June 8, 2005


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Schematic of the “Market” for Drugs

Seller

Buyer

“Normal” Market Outpatient Drug Market

Pharma

Pharmacy

Patient(Consumer)

Physician(Picker)

HealthPlan(Payor)


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OverviewThe Major Trends and Their Implications

What’s Happening?• In the doctor’s office• In the patient’s home• At the payor’s offices• In the pharma research labs and offices

What are the Implications for Drugs?• Promotion• Pricing• Regulation


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The Doctor is InStill the keystone of healthcare decisions

• But busier than ever• Physicians need ways to save time and improve productivity

• Average physician visit with patient ~ 7 minutes• Average physician spends 23 minutes of each hour on paperwork

• Physicians need to recall increasing amounts of information• More than 70% of the top drugs have been introduced in since 1975• Average large physician group contracts with over 15 health plans

• And paid less• Real income for physicians declined from 1996 to 2000

• Medicare reimbursement set to decline by 5% per year

under Sustainable Growth Rate formula unless

Congress intervenes (again)

• Meanwhile, costs are increasing, particularly

malpractice premiums


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This Drives

• Growth of group practices• IPAs, etc., emerged in 1980’s• Scale efficiency (especially administrative tasks)• Patient coverage

• Growing interest in HIT*• Ease of use and price are primary concerns• 50% use PDAs today, 25% more “plan” to own in 12 months (often 1st step)• 32% use EMRs with 57% interested in learning more• 22% use eRx with 58% interested in learning more• But low brand familiarity (outside of Microsoft, Epocrates, WebMD)• Expect positive ROI but significant transition costs

• Less time for pharma reps• 2/3 of reps report reduction in call length (50% say >20% less; avg. 3 min.)• 50% say harder to get to MD• Fewer successful details per rep (750 vs. 1450 during ’95 –2000)

*PriMed Healthcare Solutions Study 2004 Annual Report


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The Patients are Demanding More ControlNo Longer Willing to Assume that the System is Working for Them

• Still scarred from managed care backlash in 1990s • Patients wary of doctors’ incentives and payor influence

• More willing to switch physicians

• Growing responsibility for costs• Out-of-pocket costs up 50% since 1995

• Employee share of premiums up almost 10% since 2000

• MSAs growing, but tax code still skews toward employer coverage


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This Drives

• Demanding more choice• Consumer-directed plans• Concierge practices• Defined contribution plans

• Patients are participating more in treatment decisions• Requesting specific medications• More use of alternative therapies

• Extensive use of Internet by consumers• Disease/therapy research • Support groups• Growing ability to research provider quality

• But more uninsured


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Healthcare Costs RisingNo Bridge over the Quality of Care Chasm

• Healthcare costs outpacing inflation• Since 1970, healthcare costs have grown almost 5x faster than CPI

• $1.9 trillion in 2005 (est.) is 15% of GDP (forecasted at 19% in 10 years)

• Despite alarm call from IOM, quality still deficient• US lags rest of developed world

• Avoidable errors compound higher spending

• Government as Payor is growing• 45% of healthcare in the US is paid for by government

• 32% Federal (16.9% Medicare before Part D)

• 13% State (Medicaid is often largest budget item)

• 1/3 of US healthcare spending is under CMS oversight


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This Drives

• Innovation• Quality initiatives

• Pay for Performance (P4P) experiments

• HIT incentives (but sometimes “free isn’t cheap enough”)

• Consolidation and Collaboration• Anthem/Wellpoint

• Oxford/UHC

• Building Bridges

• Cost Shifting


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Pharma is Faced with Array of ChallengesIs the golden age over?

• Challenges in research• Not enough blockbuster drugs

• Drugs aimed at more targeted populations (niche markets)

• Safety issues (Baycol, Vioxx)

• Generic entry still accelerating

• Challenges in credibility• Favorite “whipping boy” inside the Beltway, with DOJ and State AGs

• 60% of sales reps report significant decline in industry reputation

• Failure to publish studies or complete post-marketing surveillance

• Reports of excessive influence over doctors, patients, research, medical education, FDA, NIH, Congress…


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The Future of Pharma

• More consolidation• To cut costs

• To bolster pipelines

• To balance power with consolidating customers/constituents

• Less reliance on the sales reps• More targeted promotions

• More use of technology – handheld and Internet

• Continued growth in CME support (but more focused)

• DTC Patient Education (including compliance/persistency)

• More pressure on prices• Medicare rebates?

• Parallel imports

• Innovative pricing schemes


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The Future of Pharma (continued)

• More regulation• Greater transparency of potential conflicts of interest

• Greater oversight with government as a larger payor

• Continued FDA scrutiny of promotions (but not pre-approval)

• Drug safety reform• Changes at FDA (pre- and post- approval, control over label)

• Product liability litigation (role of DTC)

• Transparency of available information


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Open Questions

• How does pharma participate in HIT growth?

• How does pharma re-establish its credibility?

© 2005 epocrates, inc. all rights reserved. slide | 1 ® ® future trends affecting the pharma,...

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